Thursday - September 6, 2007
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1. ZACKS RANK BUY STOCKS
Zacks #1 Rank stocks average a 32.2% annual return. Every day on Zacks.com we highlight four new Zacks Rank Buy stocks. Each individual stock is chosen based on how well they match the criteria for the four main schools of investing: Aggressive Growth, Momentum, Growth & Income and Value.
Aggressive Growth - Shanda Interactive Entertainment Limited (SNDA)
Shanda Interactive Entertainment Limited (SNDA) just turned in an impressive quarter that took some analysts by surprise. The company has made it a habit of exceeding analyst expectations, which is a prerequisite for an explosive growth stock. Earnings estimates for this year have jumped a dime in just the past week to $1.56 per share. They rose 15 cents for next year. The stock sports an outstanding ROE of 32%. Read the full analysis on SNDA now!
Corning Incorporated (GLW) exceeded analysts' earnings expectations in six consecutive quarters and in nine out of the past 10. The company reported solid results for its second quarter in late July. Consensus earnings estimates for this year and next have risen over the past two months. Earnings per share are expected to grow 19% over the next 3-5 years. The Board of Directors recently approved a $500-million share repurchase plan and declared a quarterly cash dividend of five cents per share. Read the full analysis on GLW now!
Momentum - American Science and Engineering, Inc. (ASEI)
Shares of American Science and Engineering, Inc. (ASEI) has been on a tear to new highs. Its fiscal first-quarter report was excellent and it even initiated a dividend. Over the past month, earnings estimates for this year have soared over 15%, and much more for next year. Technically, the stock just hit new 52-week highs, and the old resistance level should turn into new support. Read the full analysis on ASEI now!
Metal Management, Inc. (MM)topped the Street's earnings estimate in five out of the past six quarters by an average margin of 27.3%. On Jul 30, the Board of Directors declared a quarterly cash dividend of 7.5 cents per share of common stock. Consensus earnings estimates for both this year and next are up over the past two months. This Zacks #1 Rank stock has a price-to-book ratio of 2.5, compared to 4.7 for the market and 2.8 for the industry. Read the full analysis on MM now!
2. Best of the Zacks $100,000 Challenge
Zacks is conducting a nationwide talent search to find the very best stock pickers. The winner gets a $100,000 dream job with Zacks! . Sign up for free to join the competition, or just read what stocks the leading players are trading on the Zacks Challenge Player Blogs.
Here's what the leading players are saying lately:
IS NOVASTAR GOING BELLY UP? (NFI)
Last year the company had...
STRONG RESISTANCE AT 1500 ON THE S&P500
Andre Krutov's (aka: Akrut) style of investing is fundamentally driven, but he will incorporate strategies that are based on technicals as well as market psychology for tweaking purposes. Such strategizing and his trading prowess has landed Andre's Simulator portfolio into fourth place. The Zacks $100K Challenge contender has more than doubled his money with a current overall return of 122% since the beginning of this year.
Some samples of the type of names that helped catapult this contestant's portfolio toward the top include Vanguard Growth ETF (VUG), Vanguard Value ETF (VTV), PowerShares QQQ (QQQQ) and PowerShares FTSE RAFI US 1500 Small-Mid (PRFZ). Take a look at his entire trading history by clicking here.
3. ZACKS EQUITY RESEARCH
Listen to the audio podcast of the Industry Rank Analysis through Zacks' NEW Audio Feature.
It has been nearly a month since the last Fed meeting. Since the Aug 8 meeting, the subprime rabbit hole has expanded and caused a climate of fear within the credit markets. Central banks have responded, with the Fed both cutting its discount rate and encouraging banks to use the discount window. The actions are an attempt to prevent the fear of rising defaults from turning into a scenario where credit is too tight.
Numerous recessions have been caused by overly tight credit standards that often came in response to lending practices that were too lenient.
To date, the problems within the credit markets have affected the overall outlook for earning growth. The consensus earnings estimate continues to call for S&P 500 earnings to total $94.06 this year.
Nonetheless, it would seem logical that full-year forecasts for financial-related firms have been falling. To gage the trend, I compared the current consensus earnings estimate for 520 companies against the Aug 8 consensus estimate for the same firms. The results were not as clear cut as one might expect.
More. . .
First the raw numbers. The average forecast was cut on 137 companies and raised on 78 firms. The average downward revision was -15.9% (a number partially skewed by American Home Mortgage (AHMIQ)) and the average upward revision was 10.7%. Excluding the three companies with the largest revisions from each group results in an average change of -9.5% and 3.9% respectively. The average change for all 520 companies was -2.6%.
Behind the numbers are more subtle changes. During the past four weeks, 170 full-year EPS forecasts have been raised and 260 estimates have been cut, a Zacks Revisions Ratio of 0.65. (For the entire Zacks Rank universe, the ratio is about 1.0). Out of the 170 forecasts that were revised upwards, approximately one-fourth were concentrated among just seven companies: Allied World Assurance (AWH), Royal Bank of Canada (RY), Nasdaq Stock Market (NDAQ), Apollo Investment Company (AINV), Blackstone Group (BX), International Securities Exchange (ISE) and Toronto Dominion Bank (TD).
Not surprisingly, Finance-Mortgage and Related Services played a notable, negative role. Full-year earnings estimates have been cut on eight of the 12 companies within this group. American Home Mortgage is now projected to post a loss of $1.21 instead of the 90-cent profit it had been expected to achieve. Similarly, profit expectations for Countrywide Financial (CFC) have been cut to $2.37 per share from $3.06 per share, a 23% drop over the period of a month.
Brokerage analysts are also becoming less optimistic about Finance-Consumer Loans. Full-year forecasts have been cut on about half of the companies within this group, including credit card issuers Capital One Financial (COF) and Discover Financial Services (DFS). The consensus estimate calls for COF to earn $5.14 per share this year versus the month-old forecast of $7.05. Projections for DFS have been cut by four cents since Aug 8 to $1.61 per share.
To read the complete Industry Rank Analysis, click here.
Charles Rotblut, CFA is the senior market analyst for Zacks Equity Research.
Real-time market insights from Zacks Equity Research Analysts. Stocks featured recently include Johnson & Johnson (JNJ), Sempra Energy (SRE), Diageo, Plc (DEO) and Ness Technologies (NSTC). To see their latest posts, click here.
Listen to the audio podcast of Earnings Trends through Zacks' NEW Audio Feature.
Estimate Revisions Fall Into the Neutral Zone
4. PROFIT TRACKS
Zacks.com is proud to share with you some of the best trading strategies that truly allow you to Profit from the Pros. Today we highlight...
Profit Tracks: Growth and Income
This screen looks for stocks that are paying dividend yields of greater than 8% along with other attractive fundamental attributes. Although this screen is based on a long-term and lower risk approach to investing, it has a history of outperforming the S&P 500.
Frontline Ltd. (FRO) satisfies the criteria for this Profit Track with a current dividend yield of 12.85%. The company recently released its results for the second quarter. Not only did the earnings per share result outperform the year-ago total, but it also came in about 56% ahead analysts' expectations. Earnings per share came in above Wall Street estimates in four of the past five consecutive quarters. Continue your research on FRO now!
Fairpoint Communications, Inc. (FRP) reported second-quarter results in early August. Revenues increased by 8.9% on a year-over-year basis. In addition to the strong revenue results, the company said its costs remain in-line and its ability to continue paying a consistent dividend is maintained. Fairpoint Communications offers a current dividend yield of 9.28%. Continue your research on FRP now!
Glimcher Realty Trust (GRT) sports a current dividend yield of 8.43%. The company posted second-quarter results in late July. Revenues of $73.1 million increased by a margin of 0.3% on a year-over-year basis. The company issued a full-year 2007 earnings outlook that ranges between $2.19 and $2.25 per share. Analysts are in agreement as evidenced by current forecasts of $2.22 per share. Continue your research on GRT now!
MCG Capital Corporation (MCGC) announced record second-quarter results in late July. Earnings per share of 47 cents topped the consensus estimate by 15% and surpassed the year-ago result. The company also declared a third-quarter dividend of 44 cents per share. MCGC's current dividend yield stands at 11.80%. Continue your research on MCGC now!
To see the full list of stocks that currently pass this winning screen, click here.
All the Profit Track strategies were created and backtested using the Research Wizard software from Zacks Investment Research. If you like this screening strategy, but want to narrow down the list of stocks and even improve the performance, then you should start a free trial to this powerful stock picking tool. Learn more about the Research Wizard free trial offer and our new special report “Top 10 Stock Screening Strategies”.
Kevin Matras shows how to pick the best industries with the Zacks Rank, and offers a unique way to create tie-breakers. Click here.
5. ZacksElite.com TIMELY BUY of the WEEK
Here you'll discover a Zacks #1 Rank stock hand selected by Ben Zacks to outperform the market over the next 30 to 90 days. This week's Timely Buy is...
Crocs (CROX) continues to set new 52-week highs and is currently trading slightly below the recent high that was established on August 27, which is same day that Crocs announced the introduction its first apparel line set to launch this October. Crocs noted that Select pieces in the men's apparel collection incorporate a new form of Crocs' proprietary material, Croslite(TM), already known in Crocs(TM) footwear. The company added that the new material, Croslite rt(TM), which stands for "relaxed technology", makes garments lightweight, versatile, breathable, and durable. Croslite rt(TM) also enables garments to be resistant to harsh chemicals and heat, ensuring longevity after exposure to sun, UV light and sweat.
All Crocs brand shoes feature Crocs proprietary closed-cell resin, Croslite, which represents a substantial innovation in footwear. The Croslite material enables the company to produce soft, comfortable, lightweight, superior-gripping, non-marking and odor-resistant shoes. These unique elements make Crocs footwear ideal for casual wear, as well as for professional and recreational uses such as boating, hiking, hospitality and gardening. The versatile use of the material has enabled the company to successfully market its products to a broad range of consumers. In 2006, the company acquired Jibbitz LLC, a unique accessory brand with colorful snap-on products specifically suited for Crocs shoes; Ocean Minded, a leading designer and manufacturer of high quality leather and EVA sandals; and 55 Hockey Productions, a producer and distributor of hockey and lacrosse equipment. Crocs are sold in over 25,000 locations and in more than 80 countries.
In late July, Crocs announced that it has entered into a definitive agreement to acquire the Bite Footwear brand for $1.75 million in cash, plus a potential earn-out of up to $1.75 million based on Bite hitting certain earnings targets over a three-year period. Crocs stated that Bite has created a portfolio of exciting and innovative footwear products that will be a terrific compliment to Crocs' existing business. Like Crocs, Bite Footwear utilizes patented technology to provide consumers with comfort, support and functionality across several target markets.
A few days prior to the Bite Footwear announcement, CROX reported second-quarter results. Earnings per share of 58 cents soared past the year-prior 19 cents and topped the consensus estimate by 32%. Second-quarter revenues shot up 162% on a year-over-year basis. The company raised its year 2007 outlook. Crocs now expects full-year earnings to range between $1.89 and $1.93 per share. Analyst are currently expecting earnings of $1.97 per share for 2007. Wall Street estimates stood at $1.53 two months ago.
OTHER TOOLS FROM ZACKS
At the heart of Zacks Investment Research is the Zacks Rank investment philosophy that continues to vastly outperform the market. Our Zacks #1 Rank (Strong Buy) List has produced the following results for investors:
And just as importantly, our #5 Ranked stocks (Strong Sells) have alerted investors as to which stocks to dump from their portfolios to avoid unnecessary losses.
FREE PORTFOLIO TRACKER
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Regards and Happy Investing,
Charles Rotblut, CFA
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*Zacks Rank performance is the total return (price changes + dividends) of equal weighted portfolios, consisting of those stocks with the indicated Zacks Rank, assuming zero transaction costs. These returns are not the result of a backtest; these are actual returns since 1988. The stocks in the Zacks Rank portfolios were available to Zacks clients before the beginning of each month (monthly rebalancing). Performance results from 1988 through September 2006 are based on a subset of all Zacks Rank stocks that excludes stocks covered by only one analyst and ADR’s.
The S&P 500 Index is a well-known, unmanaged index of the prices of 500 large-company common stocks, mainly blue-chip stocks, selected by Standard & Poor's. The S&P 500 Index assumes reinvestment of dividends but does not reflect advisory fees. An investor cannot invest directly in an index.
Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.
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